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A cross-country comparison of market structures in European banking

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Author Info

  • Olivier de Bandt

    () (Banque de France)

  • E Philip Davis

    () (Brunel University)

Abstract

In order to assess the effect of EMU on market conditions for banks based in countries which adopt the Single Currency, we use the H indicator suggested by Panzar and Rosse (1987). Our contribution is to assess results separately for large and small banks, and for interest income and total income as a dependent variable. From a panel of banks over the period 1992-1996, we provide evidence that European banking markets for large banks in the mid-1990s were still characterised by monopolistic competition, as compared to the United States. Regarding small banks, the level of competition appears to be even lower, especially in France and Germany. EMU would therefore imply a notable rise in competition for small banks in France and Germany, as well as an increase in competition for large banks, especially in Italy.

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 7.

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Length: 38 pages
Date of creation: Sep 1999
Date of revision:
Handle: RePEc:ecb:ecbwps:19990007

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Related research

Keywords: banking; competition; EMU; panel data analysis; contestability;

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References

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  1. E.P. Davis & Sinikka Salo, 1998. "Excess Capacity in EU and US Banking Sectors - Conceptual, Measurement and Policy Issues," FMG Special Papers sp105, Financial Markets Group.
  2. Molyneux, Phil & Lloyd-Williams, D. M. & Thornton, John, 1994. "Competitive conditions in european banking," Journal of Banking & Finance, Elsevier, vol. 18(3), pages 445-459, May.
  3. Chiappori, Pierre-Andre & Perez-Castrillo, David & Verdier, Thierry, 1995. "Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates," European Economic Review, Elsevier, vol. 39(5), pages 889-918, May.
  4. J.A. Bikker & J.M. Groeneveld, 1998. "Competition and Concentration in the EU Banking Industry," Research Series Supervision (discontinued) 8, Netherlands Central Bank, Directorate Supervision.
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Citations

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Cited by:
  1. Corvoisier, Sandrine & Gropp, Reint, 2002. "Bank concentration and retail interest rates," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2155-2189, November.
  2. Brissimis, Sophocles N. & Magginas, Nicholas S., 2005. "Changes in financial structure and asset price substitutability: A test of the bank lending channel," Economic Modelling, Elsevier, vol. 22(5), pages 879-904, September.
  3. Gual, Jordi, 2004. "The Integration of EU Banking Markets," CEPR Discussion Papers 4212, C.E.P.R. Discussion Papers.
  4. Mariarosaria Agostino & Francesco Trivieri, 2010. "Is banking competition beneficial to SMEs? An empirical study based on Italian data," Small Business Economics, Springer, vol. 35(3), pages 335-355, October.
  5. Diaz, Belen Diaz & Olalla, Myriam Garcia & Azofra, Sergio Sanfilippo, 2004. "Bank acquisitions and performance: evidence from a panel of European credit entities," Journal of Economics and Business, Elsevier, vol. 56(5), pages 377-404.
  6. Pablo Alonso González & Irene Albarrán Lozano & Andrea Giuliodori Khalil, 2006. "El Impacto del descenso en los Tipos de Interés sobre el margen financiero de las Cajas de Ahorros españolas," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(1), pages 98-136, January.
  7. Allen, Franklin & Laura, Bartiloro & Oskar, Kowalewski, 2005. "The Financial System of the EU 25," MPRA Paper 652, University Library of Munich, Germany.
  8. Gual, Jordi, 2003. "Integration of EU banking markets, The," IESE Research Papers D/504, IESE Business School.
  9. Calcagnini,G. & Farabullini,F. & Hester,D.D., 2000. "Financial convergence in the European Monetary Union?," Working papers 22, Wisconsin Madison - Social Systems.
  10. José García Solanes & Diego Peñarrubia, 2001. "Economic Integration and Banking Mergers Strategies," Working Papers 01-07, Asociación Española de Economía y Finanzas Internacionales.
  11. De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1045-1066, June.
  12. Martin Mandel & Vladimír Tomšík, 2011. "Regulation of the Banking Sector From the Economic Theory´s Point of View," Politická ekonomie, University of Economics, Prague, vol. 2011(1), pages 58-81.
  13. Benoît Mojon, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 40, European Central Bank.
  14. Livio Stracca, 2003. "The Functional Form Of The Demand For Euro Area M1," Manchester School, University of Manchester, vol. 71(2), pages 172-204, 03.
  15. Trivieri, Francesco, 2007. "Does cross-ownership affect competition?: Evidence from the Italian banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(1), pages 79-101, February.
  16. Boris Hofmann, 2006. "EMU and the transmission of monetary policy: evidence from business lending rates," Empirica, Springer, vol. 33(4), pages 209-229, September.
  17. Bernardo Batiz-Lazo & Douglas Wood, 2002. "Strategy, Competition And Diversification In European And Mexican Banking," Industrial Organization 0211013, EconWPA.

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